Crude oil prices have been rising despite global unrest and the continuation of the OPEC+ supply cut. According to ING commodities strategists, supply-side tightening has sent the price of Brent close to $86 per barrel, up more than 10% since the beginning of the month.
Oil group cuts indicate that there is still room for the market to rise above its current levels and that the market should tighten further into the third quarter.
Notwithstanding the poor demand forecast for China and the US, prices increased. Recent data indicates a decline in China’s industrial production and refining activities. The US earlier announced a surprising spike in oil inventories during this period, according to the most recent figures from the American Petroleum Institute.
The weak demand outlook from the world’s largest oil consumer, the US, was upturned by the latest report by the Energy Information Administration (EIA).
The EIA reported that US commercial crude oil inventories declined by 2.55 million barrels over the last week. The draw was driven by an increase in exports, which were up 1.23 million barrels per day week-on-week, while imports fell by 1.25 million barrels per day week-on-week.
Refined products also saw inventory declines, with gasoline and distillate stocks falling by 2.28 million barrels and 1.73 million barrels, respectively.
The Brent forecast for 3Q-2024 remains unchanged at $88 per barrel, ING said, adding that EIA’s weekly inventory report would have added to the positive sentiment in the market.
Analysts said part of this draw would have been due to lower refinery run rates, which fell 1.5pp over the week. However, stronger demand also played a key role.
Implied demand for total refined products increased by 1.86 mb/d, with increases in gasoline, distillate, jet, and fuel oil demand. Meanwhile, European natural gas prices continue to trade in a relatively volatile manner.
